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Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management s beliefs and assumptions and on information currently available to our management. All statements
other than present and historical facts and conditions contained in this report, including statements regarding our future results of operations and financial positions, business strategy, plans and our objectives for future operations, are
forward-looking statements. When used in this report, the words aim, anticipate, assume, believe, contemplate, continue, could, due,
estimate, expect, goal, intend, may, objective, plan, predict, potential, positioned, seek, should,
target, will, would, and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology identify forward-looking
statements. Forward-looking statements include, but are not limited to, statements about:
to the section in our Annual Report on Form 20-F for the year ended December 31, 2015 Item 3.D. Risk Factors for a discussion of important factors that may cause our actual results to differ materially from those expressed or
implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the
inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans
in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
You should read this report and the documents that we reference in this report completely and with the understanding that our actual future
results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Our business faces significant risks. You should carefully consider all of the information set forth in our Annual Report on Form
20-F filed on April 15, 2016 and in our other filings with the United States Securities and Exchange Commission ( SEC ), including the following risk factors which we face and which are faced by our industry. Our business, financial
condition or results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in
these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other SEC filings.
Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements
We have a limited operating history, no products approved for commercial sale and we may incur significant losses in the future, which makes it difficult
to assess our future viability.
We are a clinical stage biopharmaceutical company applying our TransCon technology to develop
sustained release prodrug therapies with several product candidates in clinical and preclinical development. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. To date, we have
focused substantially all of our efforts on our research and development activities and, in particular, developing our lead product candidate, TransCon human growth hormone, or TransCon hGH, TransCon Parathyroid Hormone, or TransCon PTH, TransCon
C-Type Natriuretic Peptide, or TransCon CNP, and our proprietary TransCon technology. We have only a limited operating history upon which shareholders and ADS holders can evaluate our business and prospects. Our revenue has been primarily generated
through collaboration agreements under which we have received up-front technology licensing fees, payments for the sale of certain intellectual property rights and payments we receive for services rendered to our collaboration partners and other
biopharmaceutical companies. Revenue generated from existing or new collaborations may fluctuate significantly over time. Accordingly, going forward, we may incur significant losses from our operations. We had a net loss of 33.8 million
for the six months ended June 30, 2016 and a net loss of 13.6 million for the six months ended June 30, 2015. We had a net loss of 32.9 million during the year ended December 31, 2015 and a net loss of
9.7 million during the year ended December 31, 2014. Our total equity was 90.9 million as of June 30, 2016 compared to 120.3 million as of December 31, 2015. Neither the net loss nor net profit we have
experienced in prior years are necessarily indicative of our future results.
None of our product candidates have been approved for
commercial sale by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or similar non-U.S. regulatory authorities, and we have not generated revenues from the sale of approved products. We expect that our annual
operating expenses may increase over the next several years as we expand our research and development efforts and operate as a public company. Even if we receive milestone payments from our current or future collaboration partners, we may incur
substantial operating losses for the foreseeable future as we execute our operating plan. Additionally, we cannot be certain that we will receive any potential milestones under our agreements with our collaboration partners.
For a discussion of the risks associated with our preclinical and clinical development programs with, and potential for milestone and other payments from, our collaboration partners, see
Risks Related to Our Business.
Even if we receive milestone payments or royalty payments from our current or future
collaboration partners, we may not be able to achieve or sustain profitability. For example, our receipt of milestone payments or up-front payments from our current and potential collaboration partners may not result in the recognition of revenue in
the period received, as we may be required to defer the revenue recognition of such payments over time, and depending upon such requirements and the period of recognition, we may still incur losses even after the receipt of such payments. Therefore,
we expect that we may incur significant losses in the future. Possible future losses would have an adverse effect on our shareholders equity. Further, the net losses or net income we incur may fluctuate significantly from quarter to quarter
and year to year, such that a period-to-period comparison of our results of operations may not be a reliable indication of our future performance.
We have never generated any revenue from product sales.
We have no products approved for sale and have never generated any revenue from product sales. Our ability to generate revenue from product
sales depends on our ability and the ability of our current and future collaboration partners to successfully complete the research and development of our product candidates and obtain the regulatory and marketing approvals necessary to
commercialize one or more of our product candidates. We do not anticipate generating revenue from product sales or our royalty rights for the foreseeable future. Our ability to generate future revenue from product sales or pursuant to milestone
payments or royalties from current and future collaboration partners depends heavily on many factors, including but not limited to:
In cases where we, or our current or
future collaboration partners, are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which regulatory approval is
granted, the accepted price for the product, the ability to get reimbursement for our products at any price and the extent of our royalty rights for that territory. If the number of patients suitable for our product candidates is not as significant
as we estimate, the indication approved by regulatory authorities is narrower than we expect or the reasonably accepted population for
treatment is narrowed by competition, physician choice, treatment guidelines or third-party payor restrictions, we may not generate significant revenue from the sale of such products, even if
approved. Our failure to generate revenue from product sales or pursuant to up-front or milestone payments and royalties from current and future collaboration partners would likely depress our market value and could impair our ability to raise
capital, expand our business, discover or develop other product candidates or continue our operations.
We may require substantial additional
financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, scale back or cease our product development or any other or all operations.
Since our inception, most of our resources have been dedicated to our research and development activities and, in particular, developing our
proprietary TransCon technology and our most advanced product candidates. In February 2015, we received $111.5 million ( 101.4 million) in net proceeds from our initial public offering after deducting the underwriting commission and
offering expenses payable by us and as of June 30, 2016, we had cash and cash equivalents of 90.8 million. We believe that we will continue to expend substantial resources for the foreseeable future, including costs associated with
research and development, conducting preclinical studies, clinical trials, obtaining regulatory approvals and, eventually, sales and marketing if any of our product candidates is approved. Because the outcome of any clinical trial and/or regulatory
approval process is highly uncertain, we cannot reasonably estimate the actual amounts of additional financing necessary to successfully complete the development, regulatory approval process and commercialization or co-promotion of any of our
Based on our current operating plan, we believe that our existing cash and cash equivalents as of June 30, 2016
will allow us to fund our operating plan through at least the 12 months from the date of this report. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner
than planned. Our future funding requirements will depend on many factors, including, but not limited to:
Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to
us on a timely basis, we may be required to delay, limit, scale back or cease our research and development activities, preclinical studies and clinical trials for our product candidates for which we retain such responsibility and our establishment
and maintenance of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates.
additional capital may cause dilution to holders of shares or ADSs, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms to us.
We may seek additional capital through a variety of means, including through public or private equity, debt financings or other sources,
including up-front payments and milestone payments from strategic collaborations. To the extent that we raise additional capital through the sale of equity or convertible debt or equity securities, the ownership interest of shareholders and ADS
holders would be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of shareholders and ADS holders. Such financing may result in dilution to holders of shares or ADSs, imposition of debt covenants
and repayment obligations, or other restrictions that may affect our business. If we raise additional funds through up-front payments or milestone payments pursuant to strategic partnerships with third parties, we may have to relinquish valuable
rights to our product candidates, or grant licenses on terms that are not favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our
current or future operating plans.
Risks Related to Our Business
We are substantially dependent on the success of our most advanced product candidates, which may not be successful in nonclinical studies or clinical
trials, receive regulatory approval or be successfully commercialized.
To date, we have invested a significant amount of our
efforts and financial resources in the research and development of our current most advanced product candidates utilizing our proprietary TransCon technology. In particular, we initiated a Phase 3 trial for TransCon hGH in pediatric growth hormone
deficiency, or GHD, patients in August 2016. We are currently planning to submit an Investigational New Drug Application, or IND, to FDA for TransCon PTH for hypoparathyroidism in the second quarter of 2017 with a combined Phase 1 single and
multiple ascending dose study in healthy volunteers planned and a pivotal study initiation targeted for TransCon PTH targeted for 2018. We are also expecting to submit an IND to FDA for TransCon CNP for achondroplasia in the fourth quarter of 2017
with a Phase 1 study in healthy volunteers planned to establish tolerable dose range. Our near-term prospects, including our ability to finance our operations through the receipt of milestone payments and potential up-front licensing payments and
generate revenue from product sales, will depend heavily on our successful development and commercialization of our most advanced product candidates, if approved. The clinical and commercial success of our most advanced product candidates and our
TransCon technology will depend on a number of factors, including the following:
Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our
intellectual property rights and the manufacturing, marketing and sales efforts of our collaboration partners.
Additionally, our clinical
and regulatory approval plan for TransCon hGH is to conduct a single Phase 3 trial in a pediatric population with a primary endpoint of mean height velocity measured at 12 months. It is possible, however, that because TransCon hGH is a prodrug form
of hGH that it is a new molecular entity, we will not be able to use this clinical and regulatory approval strategy. If we have to, or choose to conduct additional or different trials, this could increase the amount of time and expense required for
regulatory approval of TransCon hGH, if approved at all. In July 2015, we reported positive top-line six-month height velocity data from 53 patients treated in our Phase 2 TransCon hGH clinical study in pediatric growth hormone deficient patients.
If the six-month mean height velocities that we observed for TransCon hGH in the Phase 2 pediatric study do not correlate to twelve month mean height velocities that we ultimately observe in our ongoing Phase 3 clinical study, TransCon hGH may not
achieve the required primary endpoint in the Phase 3 clinical trial, and therefore may not receive regulatory approval.
cannot be certain that our most advanced product candidates will ever be approved or successfully commercialized, or that we will ever generate revenue from sales of such product candidates. If we and our collaboration partners are not successful in
completing the development of, obtaining approval for, and commercializing our most advanced product candidates, or are significantly delayed in doing so, our business will be harmed.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and we may
encounter substantial delays in our clinical studies. Furthermore, results of earlier studies and trials may not be predictive of results of future trials.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we, or our current or future
collaboration partners, must conduct extensive clinical studies to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain.
Failure can occur at any time during the clinical trial process; the results of preclinical and clinical studies of our product candidates may not be predictive of the results of later-stage clinical trials. For example, the positive results
generated to date in preclinical and clinical studies for TransCon hGH do not ensure that the ongoing Phase 3 clinical trial, or other clinical trials, will demonstrate similar results. Product candidates in later stages of clinical trials may fail
to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical, biopharmaceutical and biotechnology industries have suffered significant setbacks